Currently over 5 million older Americans require care for chronic disability. The cost of providing long-term care to these Americans currently amounts to over one hundred billion dollars per year. In light of impending growth in the number of older disabled Americans and the current deficit-reduction climate, policy makers now face important questions about how to best restrain growth in public spending for long-term care. Because costs are driven by families decisions about the intensity, structure and balance of arrangements over time, policy makers seeking to control costs require a basic understanding of how families choose care arrangements in response to health declines and improvements of older family members. Yet surprisingly few studies have investigated basic questions about the relationship between health and care trajectories of older disabled Americans over time. The goal of this FIRST award is to understand the dynamic process driving long- term care decisions, particularly the ways in which older persons and their families respond over time to changes in the health of older family members. Using a dynamic, interdisciplinary framework, two overarching research questions will be explored: 1) How do older disabled Americans and their families shift care arrangements in response to various health trajectories and what are the critical junctures in the health progression of older disabled Americans when families shift the intensity and structure of care? And 2) How do various health trajectories affect the balance of informal and formal care over time? That is, under what circumstances do changes in health lead to the displacement of formal care over time? That is, under what circumstances do changes in health lead to the displacement of formal for informal care over time and what is the magnitude of that displacement? To address these issues, the project will use multiple waves from two relatively new nationally representative panel survey: the Study of Asset and Health Dynamics of the Oldest Old (AHEAD) and the Medicare Current Beneficiary Survey (MCBS). Answers to these questions will provide critical information on the underlying process by which older disabled persons and their families cope with disability over time.